The People's Trust

[newlyretired]

Daniel Godfrey is launching a crowd funded investment trust:

http://thepeoplestrust.co.uk/

They have almost reached their £100,000 minimum target

It looks interesting to me, and I'm in for £20 as a founder

newlyretired

[MusingMarket]

Good luck to investors, though I don't see how it's different to any other investment company/trust. The bit of the website blurb I'm most sceptical of is:

"We’d expect to invest about 1% of our funds in direct social impact investment. This is based on the assumption that The People’s Trust will grow to around £2 billion in size within a few years."

Growing to £2bn is highly unlikely unless you start off large too. Murray International tripling in size over a decade (net assets went from £399m to circa £1.2bn between 2003-2012) or the septupling of Personal Assets since 2001 ( from under £100m to over £700m) is rare and requires exceptional out-performance leading to near constant issuing of new shares.

Starting out as a large trust is also highly unlikely. Only Scottish Mortgage, Alliance, F&C and RIT have a value above £2bn (excluding infrastructure oddities such as 3i and HICL) on the London market.

BACIT and Woodford Patient Capital are two examples of recent successful, in terms of issuance, new ITs and they’re still relatively small despite the involvement of Jeremy Tigue and Neil Woodford. BACIT has assets under £500m and that’s after doubling in size shortly after its initial public offering thanks to a successful c-share subscription. Since 2014 there hasn't seen much growth in market capitalisation. Woodford Patient Capital has assets around £800m and is now on a discount so in the short-term looks like it'll shrink in size rather than expand with the intent to keep the discount in check.

Again, I hope anyone involved in or investing in a new investment company has success but realise there are downsides even if underlying performance is okay. If the trust investment managers perform akin to the market as a whole the share price will likely go from par to a discount of 10%+. This discount in share price to net asset value can be mitigated by buying back shares but that will shrink the asset base leading to higher expenses (I note the 1%-1.5% initial expense ratio which “The People’s Trust” hope to reduce by increasing its size) and more illiquid pricing. This illiquid pricing would see market makers demand more to trade shares, a bid-offer spread of 3-4% is not unusual for investment companies with assets around £200m. I don’t think the 0.5%-1% discount for “founders” as mentioned on the website is a good trade off for the risks of buying into an investment company at IPO. I’d want some other form of benefit for this risk, typically this would be subscription shares or warrants.

[GJHarney]

I've signed up as an early supporter and paid my £20. It appeals to me on a number of levels if it can be pulled off. The fact that it's an IT, that there is a commitment to transparency by Godfrey (whose history on this gives some confidence to the claim), that it won't pay bonuses and that it will adopt a multi-manager approach (not every likes this I know). Potentially it may pick up some of the low risk ethical type of investors that could fall out of BACIT if the proposals to completely alter that IT go through.